Inflation??? What inflation???

Inside The “Low-flation” Myth: A Disquisition On Inflation Seen And Not Seen

By David Stockman

After paying my bills the other day I had home heating and electric utility costs on my mind—the winter having been an unusually harsh one in NYC like much of the rest of the nation. But then I noticed a story by an outfit called CNS News.com that contained some great historical graphs on decades worth of utility prices, and I was duly reminded that this wintery winter wasn’t all that: Home utility and fuel costs have been rising at a pretty robust clip for more than a decade now.

Indeed, notwithstanding the modest weight (5%) ascribed to utilities and fuel in the BLS price basket, there are few households in America that have escaped their relentless grind higher. Nor would most everyday Americans shuck this off as a trivial component of their own cost-of-living index or express relief that all remains copasetic on the inflation front— since these large utility and fuel gains have been offset by falling iPad prices and hedonic adjustments to the price of their $40,000 family sedan.

The fact is, the price index for electrical power increased by 5.3% during the past 12 months and has reached an all-time high. But I get it. That doesn’t count as “inflation” because its not in the Fed’s preferred measuring stick—the PCE deflator ex-food and energy. And, yes, they do have a point about the short-run volatility of commodity-driven components of the index like the price of Kwh’s from your local utility.

Heck, the price of power is even seasonal—-rising in the spring, peaking with the summer air-con load and then re-tracing in fall-winter. The latter is supposedly already factored into the BLS’ seasonal maladjustments. But, still, it can be granted that on a short-run basis of a few quarters or even years there is probably a lot of off-trend “noise” in electricity prices.

When it gets to a time frame of a decade running, however, I’ll put my foot down. Back in 2004-05, the government said the average price for electrical power was 9.0 cents/ Kwh compared to the 13.5 cents posted last week for March. Doing the math, that’s a compound growth rate of 4.5% over a decade. And that’s not noise. Its signal. Its inflation...

Read the rest here:
http://www.lewrockwell.com/2014/05/david-stockman/the-lowflation-myth/